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Retirement plans are not legally required to recoup overpaid benefits from retirees.
Recoupment is currently legal. However, retirement plans sometimes claim that the IRS requires them to recover the overpayments from retirees. This is not true. Beginning in 2015, the IRS has consistently stated that retirement plans may recover overpaid benefits, but that they are not required to recoup overpayments from retirees. Meanwhile, depending on the specific facts of your situation, there may be other legal arguments for why your retirement plan should not recoup against you.
Retirement plans may not recoup against the widowed spouse of an overpaid retiree.
When a married retiree in a pension plan dies, the retiree’s widow or widower is often entitled to a monthly survivor benefit for the remainder of the spouse’s life. The IRS takes the position that, if a retirement plan mistakenly overpays a retiree, the retirement plan may not try to recover that overpayment by reducing the spouse’s survivor benefit payments or demand that the spouse repay the plan. However, if a retirement plan makes a mistake in calculating the amount of the survivor benefit payable to the widow or widower, the plan may attempt to recoup that overpayment.
Recoupment can be disputed.
While recoupment is technically legal, the Pension Rights Center and the six federally funded pension counseling projects have often been able to stop retirement plans from recouping overpaid benefits from innocent retirees. In other cases, we have been able to negotiate with retirement plans to offer repayment options that were less financially harmful to retirees. If your retirement plan claims that it has overpaid you or your spouse and is now demanding repayment, you may want to reach out to one of the pension counseling projects or contact the Pension Rights Center to request free legal assistance.
In today’s challenging pension environment, our work is more important than ever. Your contribution will help make it possible for the Center to continue its crucial role as a national consumer organization committed to protecting and promoting retirement security.